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Fertility and labor supply of the old with pay-as-you-go pension and child allowances

Author

Listed:
  • Chen Hung-Ju

    (Department of Economics, National Taiwan University, Taipei 10617, Taiwan)

  • Miyazaki Koichi

    (Faculty of Economics, Kagawa University, 2-1 Saiwaicho, Takamatsu, Kagawa 7608523, Japan)

Abstract

We investigate the effects of pay-as-you-go pension and child allowances on fertility, labor supply of the old, and welfare. For this purpose, we analyze a small open overlapping-generations model in which fertility and an old agent’s labor supply (retirement time) are endogenized with pay-as-you-go pension and child allowances. We find that how the pay-as-you-go pension tax rate affects the fertility rate depends on whether an old agent retires. When an old agent fully retires, then the size of the interest rate and fertility rate determine the effect of the pay-as-you-go pension tax rate on the fertility rate. When an old agent works, the pay-as-you-go pension tax rate certainly reduces the fertility rate. In addition, how child allowances affect the fertility rate depends on whether an old agent works. If an old agent retires fully, then an increase in the child allowance tax rate increases the fertility rate. When an old agent works, this is not necessarily true, which suggests that an old agent’s labor status should be taken into account when we evaluate the effects of the social security system on economic variables. In addition, we examine the effect of the social security tax rates on welfare and provide numerical examples.

Suggested Citation

  • Chen Hung-Ju & Miyazaki Koichi, 2018. "Fertility and labor supply of the old with pay-as-you-go pension and child allowances," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(1), pages 1-19, January.
    • Handle: RePEc:bpj:bejmac:v:18:y:2018:i:1:p:19:n:8
    DOI: 10.1515/bejm-2016-0182
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    References listed on IDEAS

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    1. Philippe Michel & Pierre Pestieau, 2013. "Social Security And Early Retirement In An Overlapping-Generations Growth Model," Annals of Economics and Finance, Society for AEF, vol. 14(2), pages 723-737, November.
    2. Miyazaki, Koichi, 2019. "Optimal Pay-As-You-Go Social Security With Endogenous Retirement," Macroeconomic Dynamics, Cambridge University Press, vol. 23(2), pages 870-887, March.
    3. Berthold U. Wigger, 1999. "Public Pensions and Growth," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(2), pages 241-241, June.
    4. Miyazaki, Koichi, 2014. "Optimal pay-as-you-go social security when retirement is endogenous and labor productivity depreciates," MPRA Paper 61166, University Library of Munich, Germany.
    5. Mizuno, Masakatsu & Yakita, Akira, 2013. "Elderly labor supply and fertility decisions in aging-population economies," Economics Letters, Elsevier, vol. 121(3), pages 395-399.
    6. van Groezen, Bas & Leers, Theo & Meijdam, Lex, 2003. "Social security and endogenous fertility: pensions and child allowances as siamese twins," Journal of Public Economics, Elsevier, vol. 87(2), pages 233-251, February.
    7. Zhang, Jie & Zhang, Junsen, 2003. "Long-run effects of unfunded social security with earnings-dependent benefits," Journal of Economic Dynamics and Control, Elsevier, vol. 28(3), pages 617-641, December.
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    Cited by:

    1. Chen Hung-Ju & Miyazaki Koichi, 2022. "Pay-as-You-Go Social Security and Educational Subsidy in an Overlapping Generations Model with Endogenous Fertility and Endogenous Retirement," The B.E. Journal of Macroeconomics, De Gruyter, vol. 22(2), pages 787-820, June.
    2. Cipriani, Giam Pietro & Fioroni, Tamara, 2024. "Human capital and pensions with endogenous fertility and retirement," Macroeconomic Dynamics, Cambridge University Press, vol. 28(2), pages 478-494, March.
    3. Hung-ju Chen & Koichi Miyazaki, 2020. "Labor productivity, labor supply of the old, and economic growth," Economics Bulletin, AccessEcon, vol. 40(1), pages 277-285.
    4. Jaimes, Richard & Westerhout, Ed, 2023. "Optimal policies in an ageing society," The Journal of the Economics of Ageing, Elsevier, vol. 26(C).
    5. Cipriani, Giam Pietro & Fioroni, Tamara, 2022. "Social security and endogenous demographic change: child support and retirement policies," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(3), pages 307-325, July.
    6. Kazutoshi Miyazawa, 2021. "Elderly empowerment, fertility, and public pensions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 941-964, August.
    7. Chen, Hung-Ju & Huang, Shang-Chieh & Miyazaki, Koichi, 2024. "Life expectancy, fertility, and retirement in an endogenous-growth model with human capital accumulation," Economic Modelling, Elsevier, vol. 130(C).

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    More about this item

    Keywords

    child allowances; fertility; labor supply of the old; pay-as-you-go pension; welfare;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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